Tuesday, November 27, 2007

“Just the beginning of a downward trend”

Home Prices in U.S. Fell Record 4.5% in Third Quarter

Home prices in the U.S. fell in the third quarter by the most in at least two decades as the subprime lending crisis caused sales to slump.

Posted by alan @ 08:48 PM (738 views)
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5 thoughts on ““Just the beginning of a downward trend”

  • “Prices will probably keep sliding as foreclosures force more properties on to the market and sales weaken as mortgages become harder to get. The slump threatens to slow consumer spending as fewer homeowners will be able to afford vacations, new autos or home improvement projects.”

    And some idiots still think certain other countries can defy the laws of economics.

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  • And some economists still don’t believe that Western economies are heading for a deflationary slump …

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  • Look at the Manhattan, NY market where I live. It seems impervious to these falls for the moment. This place is going to plummet when Citi workers and other Bank staff get tiny bonuses or get laid off. The only winners here are Goldman Sachs and Hedge Fund owners that moved their position to bet on sub-prime losses. The impact will, I predict, be devastating for this City as people are living in cloud cuckoo land here and continue to ignore the warnings. Worse they allow themselves to suffer as property owners push up the prices of rents so when things go bad, there will be chaos.

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  • Can anyone explain why the UK is lagging the US though ?

    We have averaged 0.6% rise in the last 6 months. I think flat over the last quarter.

    I guess
    1. The UK MPC only dropped to 3%, not 1% as in the US.
    2. UK has less teaser rate mortgages.

    In other words, it is primarily interest rates causing the price drops in the US.

    Looking a tthe UK, primary causes are:
    1. Slow strangulation of the credit oversupply through re-pricing of IRs for risky borrowers
    2. Outright high prices causing difficulty for buyers.
    3. Media sentiment.

    Which all take a lot longer to filter through.

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  • US property values expected to fall by another $1,200 billion in 2008 – the destruction of wealth on an unprecedented sale.

    The mortgate loans on these properties are treated as “assets” by banks, brokers etc. Assets they use to borrow more money to create yet more mortages and other loans.

    As the value of these properties fall, owners default, the mortgage assets fall in value, undemining the value of the other loans backed by theses mortgages …… as the risks increase mortgage rates are increased pushing down property values further ….. a vivcious circle develops

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